Quote:
Originally posted by wig@Jun 9 2003, 09:47 AM
The bust in the 30's was due to the fiat currency scenario which started with the creation of the Federal Reserve in 1914 and the easy money that followed.
This was then followed by the confiscation of gold in 1933.
I agree that the frequency has declined, which is what I meant by elongated cycles.
I do not think we have had the amplitude in expansions and contractions prior to the fiat system.
|
And of course there are many more theories than that out there. I rather suspect a combination of factors.
I just read John Kenneth Galbraith's "The Great Crash" a few weeks ago in which he contradicts that. There is a chapter at the end titled "Cause and Consequence" in which he points out that credit has been easy many times before and after without causing a similar boom and bust. Furthermore, he says, "money, by the ordinary tests, was tight in the late 1920s".
I would argue that the system of fractional reserve banking and fiat money has been quite successful. Life is good. If the creation of the federal reserve was the cause of the depression, how have we done so well since then?
I think one would find the amplitudes of the booms and busts in GNP pre-depression to be about twice that of the post-recession booms and busts. Maybe for other good reasons but difficult to know.